My projections for this week’s inventory report are summarized in the following table. I am expecting the US refining sector to throttle back runs this week... a result of the preemptive shutdowns ahead of Isaac. I am expecting a significant draw in crude oil inventories, a draw in gasoline and a large draw in distillate fuel stocks all related to Isaac. I am expecting crude oil stocks to decrease by about 11.5 million barrels. If the actual numbers are in sync with my projections the year over year surplus of crude oil will now show a small deficit of 0.1 million barrels while the overhang versus the five year average for the same week will come in around 16.2 million barrels.
I am expecting a modest draw in crude oil stocks in Cushing, Ok as the Seaway pipeline is now pumping and refinery run rates are continuing at high levels in that region of the US. This would be bearish for the Brent/WTI spread in the short term which is now trading over the $19/bbl premium to Brent level. I am still of the view that the spread will continue the process of normalization over the next 6 months.
With refinery runs expected to decrease by 6% I am expecting a large draw in gasoline stocks. Gasoline stocks are expected to decrease by 5.5 million barrels which would result in the gasoline year over year deficit coming in around 13.1 million barrels while the deficit versus the five year average for the same week will come in around 9.6 million barrels.
Distillate fuel is projected to decrease by 3 million barrels. If the actual EIA data is in sync with my distillate fuel projection inventories versus last year will likely now be about 33.7 million barrels below last year while the deficit versus the five year average will come in around 29.1 million barrels. Exports of distillate fuel during the storm were likely held back.
The following table compares my projections for this week's report (for the categories I am making projections) with the change in inventories for the same period last year. As you can see from the table last year's inventories are not in the same direction as the projections. As such if the actual data is in line with the projections there will only be a significant change in the year over year comparisons for the entire complex...due to Isaac.